"Substandard" New Zealand-made baby formula and milk powder is being rejected at China's border, raising concerns that coverage of the issue in the Chinese media could damage this country's lucrative reputation as a producer of safe dairy products.

A report in the People's Daily newspaper says China's Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) returned or destroyed 270 tonnes of infant formula and milk powder in the 14 months to October, more than half of which came from New Zealand and Australia.

More than three-quarters of the substandard imports were baby formula, the report said, including 26 tonnes of New Zealand-made "Ioland" formula, which was rejected for insufficient iodine content. Iodine deficiency can cause stunted growth and mental impairment in infants.

In another report by the state-run Xinhua news agency, published yesterday on the Shanghai Daily website, reporters visited supermarkets to ask consumers if they were concerned about the "quality issues" highlighted by AQSIQ's rejections of imported formula and milk powder products.

"Now that expensive foreign milk powder products are also flawed, I wonder if there is any milk powder that is safe enough to feed my 1-year-old daughter," one shopper was quoted as saying.

The 2008 melamine scandal - in which six Chinese babies died and thousands became sick after consuming tainted dairy products - led to a huge rise in demand for imported formula, which is deemed safer than locally made products by many parents in the world's second-largest economy.

Ioland's website says the company is based in the Chinese city of Ningbo but has its formula manufactured by Sutton Group, an Auckland-based contract manufacturer.

Attempts to contact Ioland by phone and email were unsuccessful.

James Shortall of Sutton Group would not confirm or deny whether the firm made Ioland products.

Some formula was being rejected by Chinese authorities because of different testing regimes in China and New Zealand, and Sutton Group was confident babies would be safe consuming all the products it made, Shortall said.

Chris Claridge, managing director of Christchurch-based infant formula exporter Carrickmore Nutrition, said some of the product rejections in China were "questionable", but the coverage of the insufficient iodine levels in Ioland products was a concern as it tarnished all New Zealand infant formula brands.

A large number of Chinese baby formula companies were creating "false fronts" by registering in New Zealand, giving the impression they were Kiwi firms, Claridge said.

Michael Barnett, independent chairman of the newly formed New Zealand Infant Formula Exporters Association, with 10 founding members, said the group was working to set standards for exporters, while establishing a "line of communication" with Chinese authorities.

A spokeswoman for the Ministry of Primary Industries said its figures for non-compliant food exports to China did not match some of the figures in the Chinese media reports used in this story, but the ministry was concerned about any New Zealand-made products being denied entry to overseas markets.